Flat Rate Pricing


The Problem with Service Departments

Does your service department suffer from the following symptoms:

  • Incomplete or sloppy service tickets
  • Low service ticket revenue
  • Customers who feel the need to shop the Internet after the diagnostic



Yes, but what do you do about it?
Call SmartYou train your technicians but you are still not achieving uniform results.  You talk with other owners and they have the same issues, so you resign yourself to live with it.  After all, you don’t receive that many customer complaints about it.  Not so fast.  Let’s examine this issue in a little more detail.

Let’s take the example of a service tech who went out on a no cooling call and found a bad capacitor.  After replacing it, he wrote the words “25 MFD Cap Bad” in the area of the ticket detailing the work performed.  Then he showed the price of the capacitor at $118 and labor at $69 for a total ticket invoice $187.  What might your customer do?  They might just get on the Internet and surf for 25 MFD Cap and correctly determine that a capacitor was replaced – only to discover that a 25 MFD capacitor can be purchased online for about five dollars.  Now they’re hot!  Obviously, they don’t understand your cost of doing business so what do they do?  Call you and complain?  Probably not.  In all likelihood, they simply stop using your services and tell everyone they know that your company is a ripoff.  Studies show that a satisfied customer will tell 2-3 people about their experience with your company, but a dissatisfied customer will tell 8-10 people about their experience.  The odds are not in your favor.  And the worst part about it?  You have no idea it’s going on!

So what is the solution?  Consider Call Smart

What is that, you ask?  Call Smart is a revolutionary point of sale, mobile system from Callahan Roach Business Solutions that runs on both Droid and iPad.  It features a unique and secure logon for each tech, and is customizable, utilizing your graphics and information.
Stay tuned for more blog posts on this subject.  In the meantime, take some time to go through recent invoices generated by your service technicians to see if you are fully satisfied – or if you think there is a better way to go.


Preparing for 2013

Preparing for 2013

Chances are, unless your area is dealing with a major onslaught of winter storms (and some are) this is an ideal time to complete a little planning for 2013 in your business.  Yes, there are the holidays and all the year-end stuff, but if you don’t do some planning now you may not get to it at all.  So, where do you start?

HVAC contractor Butch Welsch suggests starting with this year’s results.  Compare your 2012 budget numbers with the real numbers he says, making note of the areas that you know need improving in the upcoming year as well as strategies that were successful for you in 2012.  Then he reviews his monthly sales leads and sales from 2012 and compares them with previous years, while reviewing monthly temperatures for those years to the current year to see what impact they may have had on sales.  For this information, he notes you can go to www.weatherunderground.com, enter your ZIP code, go to history, and then monthly to find information to help your planning process.  From there you can begin to make estimates of monthly sales for the upcoming year.

There are 3 areas where a contractor can improve their profit margins: by increasing sales, by achieving higher gross margins or by reducing overhead expenses.  You must determine how your business can do this for the upcoming year, laying out specific strategies and tactics for each.  For example, one way to increase gross margins if you are currently utilizing time and material pricing is to implement flat rate pricing.  Since this strategy can begin to make an immediate difference, you would want to plan for its implementation as early in the New Year as possible.  You can start with a call to Callahan Roach for additional consultation to see if this is right for your business.

You can then begin the New Year with the confidence of knowing your business is operating by plan and not by whim.


Presenting the Price in a Flat Rate World

In a recent blog we discussed the importance of performing a professional and thorough diagnostic.  Excellent, your professional tech did a system evaluation and found the apparent problem.  By “apparent” I mean, he found the noisy motor which prompted the customer to call your office.  The customer self diagnosed the repair, hoping to keep costs minimal.  They DO know there’s a noise coming from the furnace, but they DO NOT know that there are airflow problems, the burners are dirty and the humidifier pad needs replacement.  These are items you found during your evaluation.

Now it’s time to let the customer know what you found and what you will be suggesting.  This is a key time to exercise what I call “bedside manner”.  The best doctors are masters at this and so should be your technician.  This all starts by the way when the tech conducts the diagnostic, but now it’s time to present the findings and prices.

There should be a “Professional Diagnosis” area on your work order to record suggested repairs.  The repairs should be in understandable language without a lot of technical jargon. 

“Repl 115vMS mtr 1/2HP — $350.00” is NOT a good way to suggest the replacement of the Multi Speed blower motor on the #2 furnace located in the Garage unit.  A better way is:

“Replace blower motor on #2 indoor unit located in garage – $350.”

It’s clear, simple and the customer knows where the unit is located, what you are recommending and the cost.  Because you evaluated the entire system, you of course will make other recommendations.  They too need to be listed in the “Professional Diagnosis” part of the work order.

Now it’s time to explain this to the customer.  Be prepared!  You should have your CAP™ flat rate manual, your work order with their name, address, phone and other important information completed.  You should ask them if all the information you have is complete and still correct.  The customer should also see that you have filled in appropriate items like amperage, pressures, settings, etc.

You should leave behind a pad of Callahan Roach “Tear offs” with the work order. The tear offs are a pad of pictures of units and components to better explain what the repair entailed or what you suggested.  This copyrighted sheet is unique to Callahan Roach.

Next Time – The Conversation Begins


How to Generate Profits in Your Pool Service Business

How to Generate Profits in Your Pool Service Business

The last 2 blogs looked at the importance of generating a profit in your Pool service business, and how to utilize flat rate pricing to make that happen.  Now let’s look at a sample service call scenario.  A tech goes to a home in response to a noisy pump.  The tech finds the bearings on the motor are bad, but also finds that the burners on the heater need cleaning and the time clock mechanism has rusted to the point of  keeping the pump running continuously.   In a time and material scenario the tech goes to the house, changes the pump and then goes on to the next service call. At $75 per hour, the contractor billed out $304 for the motor and $75 labor for an invoice total of $379. This will yield an approximate Gross Margin of 53.3%, which for most service companies is close to breakeven.

In a flat rate scenario, the tech charges the customer a diagnostic fee, takes the time to thoroughly analyze the entire pool and spa system, and then makes recommendations for all repairs.  This gives the customer options to buy suggested repairs.  With the finding of dirty burners and a defective time clock mechanism, the repair is larger than just replacing the motor.  Now the call went to $786, taken from the flat rate manual based upon $100 per hour (not a rate shared with the customer) which includes $391 for the motor, $100 for the burner cleaning and $246 for the time clock mechanism, PLUS $49 for the diagnostic. This repair yields a margin of 63.65%. Now the service company makes a profit! For most this would yield a Net Operating Profit of 10 – 15%, which is fully acceptable.  If your costs are more or less, you can modify the parts markups or labor rates by which the books are generated to more closely match your market. It’s also based upon a labor rate that can be higher if you choose.

Good news, right?  Well the better news is that the customer PREFERS the flat rate scenario because you gave them the option to accept or decline the repairs before the job was started AND they fully knew how much the cost would be prior to commencement of work.  This is far more preferable to the imprecise time and material method.

Ok, in 3 short blogs we have raised margins by 19.4%. Time well spent and a business strategy worth exploring.  Ready to dive in?

Learn More: Callahan Roach’s: Pool & Spa – Flat Rate Pricing


Flat Rate Pricing– The Key to Professional Service

If you’ve been servicing the public in the recent past, you may have been offering your customers an hourly service rate with a “Service Call” charge which pays for you to travel to the customer’s home and do a nominal assessment of the problem they have called you out for. With flat rate pricing, you will no longer charge the initial Service Call.  You’ll use a Diagnostic Charge.

 

Mike Hajduk, President, Callahan Roach Business Solutions presents how to do this in three easy steps. 

 

Step Three: Conducting a Good System Diagnostic

 

The next thing is that you have to DO a good system diagnostic. We’re not suggesting that you merely add a diagnostic tax to every service order. Actually PERFORM the necessary tasks to do a professional determination of the status of your system.

  • Ask the customer how the system is performing.
  • Check all power connections.
  • Check all safety situations.
  • Check the cleanliness of the coils.
    Look for building anomalies.
    Take a step back and look for design problems
  • Look for duct leaks.

 

All these items are what good heating and air conditioning companies do on EVERY service call.  They take time. Time is money. And unless you actually perform them, you are not really doing what your customer expects from your company. Tell them the things that you WILL be doing.

The change in your business method of operation may feel a bit uncomfortable at first. Most new things you do are. But not only is it what your customers WANT, but it’s also PROFITABLE


Flat Rate Pricing – The Key to Professional Service

If you’ve been servicing the public in the recent past, you may have been offering your customers an hourly service rate with a “Service Call” charge which pays for you to travel to the customer’s home and do a nominal assessment of the problem they have called you out for. With flat rate pricing, you will no longer charge the initial Service Call.  You’ll use a Diagnostic Charge.

 

Mike Hajduk, President, Callahan Roach Business Solutions presents how to do this in 3 easy steps.

 

STEP 1:

 

First of all, customers DO NOT like the notion of Service Call charges, Trip Charge, Show up charge, Truck Charge or any other name we give to the costs incurred for you to send a service tech to a customer’s home or business. While these are REAL costs, the customer still doesn’t like them. In fact, out of guilt, or in the perception that you will lose customers, you may even waive your service call charge if the customer agrees to the work you recommend.  Well, that’s unprofitable and tips your hand to your customer that you are willing to compromise your rates.

 

So, let’s give them what they DO like. 

 

They like a Diagnostic. It makes sense to them.

A diagnostic is simply the professional assessment of not only the apparent problem, but also the Root Causes and other problems occurring in the system.  What customer can argue with that?

You owe it to your customer, and your customer expects you to be a professional diagnostician, so by doing a diagnostic is the ONLY way to service your customer.


Next  Blog – Step 2: “How do I present the diagnostic as a charge?”


Benefits of Flat Rate Pricing

The Callahan Roach – Customer Assurance Pricing (CAP™) repair database saves the time and expense of maintaining a client’s own repair database, allowing the client to concentrate on their core business – serving the customer.

Most importantly, CAP™ can determine the cost of doing quality service – including improvements to equipment, trucks and employee training – then establishes a labor rate that will ensure profits and growth for the company.